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Description

As artificial intelligence (AI) reshapes the economy with comparative speed and scope as during the First Industrial Revolution, policymakers face a familiar dilemma: how to preserve technological progress while addressing its negative externalities. This article proposes a uniform, carbon-based Pigouvian tax on AI as a practicable and forward-looking solution to correct one of AI’s most readily measurable negative externalities without stifling innovation. Drawing on lessons from existing carbon-pricing systems, this article contends that such a tax should be designed with flexibility and transparency to promote both effectiveness and political feasibility. Properly structured, the tax would not deter AI development but better align innovation with collective welfare.

Publication Date

Spring 2026

Document Type

Article

Keywords

Carbon-based Pigouvian tax, Artificial Intelligence, Technology, Fourth Industrial Revolution, Negative Externalities

Disciplines

Environmental Law | Law | Tax Law

REVISITING THE MISSED PIGOUVIAN OPPORTUNITY OF THE FIRST INDUSTRIAL REVOLUTION: A CARBON-BASED PIGOUVIAN TAX ON AI

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